L’Oréal: risque sur la prime de valorisation selon Merrill

Bank of America Merrill Lynch a abaissé son avis sur L’Oréal à « sous-performance », avec un objectif de cours de 82 euros. 

La banque estime que la prime de valorisation du groupe de cosmétiques, de 17% sur les comparables boursiers et de 90% sur le FTSE Europe, est menacée par une croissance organique qui ralentit et des difficultés à faire croître les marges. Le potentiel de révision en hausse des BPA est donc très limité, estime Merrill.

« Premium valuation at risk
We downgrade L’Oreal to Underperform from Neutral on an €82 PO. L’Oréal shares currently trade on a Cal’12E PE of 18.0x, a 17% premium to EU staples and a 90% premium to FTSE Europe. L’Oréal also trades at a 22% premium to Luxury (ex Hermes) despite ~50% lower forecast 2012/13E EPS growth. In 2012E, we expect a slowing top line and muted margin expansion will limit scope for consensus EPS upgrades and potentially lead to further derating.

Organic sales growth appears vulnerable
At 3Q11 results, mgmt issued more cautious guidance, stating 4Q11 org. sales growth should be similar to 3Q (+4.8%), despite an easier comp and 4Q-wtd new product launches. In our view, mgmt’s caution reflects a fragile state of consumer spending in developed mkts. Cosmetics demand has historically proven sensitive to changes in consumer confidence, particularly in the U.S. and W. Europe (40% of sales). Confidence deteriorated in many developed markets in 2H’11 and a sustained decline could hurt L’Oreal’s more discretionary products. We expect a slowdown in cosmetics market growth to ~3% in 2012E vs. ~4% in 2011E.

Margin growth could disappoint in 2012
While L’Oréal remains committed to raising long-run profitability, margin uplift has proven volatile, impacted by cyclical demand and increases in A&P and R&D. We see risk to 2012E margins and expect L’Oréal to reinvest cost savings and SG&A leverage in further A&P “sales fuel” to bolster softer org. sales growth.

2010-13E EPS CAGR of 6.6%
Our 2012E EPS of €4.54, +8.3%, is based on lowered org. sales growth of 3.8% (5.5% prior) reflecting our expectations for lower cosmetics market growth and +27bps EBIT margin expansion to 16.1%. Our 2013E EPS of €4.86, +7%, reflects 4.8% organic sales growth and +34bps rise in EBIT margin to 16.4%. We forecast below consensus 2012E DPS of €2.10, +8.9%, based on a 45.5% payout ratio. »